It’s no secret that corporate America has a diversity problem. And it starts at the very top. Growth in the number of minority directors on US corporate boards has been painfully slow.
Last year, just 19% of all directors at the top 200 companies of the S&P 500 were minorities, defined as African-American/Black, Asian and Hispanic/Latino, according to the latest US Spencer Stuart Board Index. That’s up from 15% in 2009.
But as the United States undergoes a powerful reckoning with systemic racism, there are some signs that boards may now start prioritizing efforts to go beyond their usual networks to fill more open seats with people of color.
For example, theBoardlist, a search platform of highly recommended executive women seeking to join corporate boards, has seen both a surge in requests for minority women candidates and in the number of minority women executives added to the platform by current and former board directors.
“Ninety percent of the conversations we’ve had with boards in the past three months has been about looking for women of color and ideally, Black women candidates,” said theBoardlist CEO Shannon Gordon.
This week, the company announced it would also include men of color among the board-ready executives on its platform.
The biggest reason boards have been so slow to diversify in the past is that boosting minority representation hasn’t been high on anyone’s to-do list, according to Crystal Ashby, head of the Executive Leadership Council, a group that aims to prepare Black executives for service on corporate boards and to raise their visibility.
“It simply hasn’t been prioritized. When diversity has been discussed, many organizations start with gender,” Ashby said. “The emphasis on gender, whether intentionally or unintentionally, has largely and exclusively allowed the focus to be on white women.”
What’s more, the recruiting process has been heavily reliant on white, male board members’ personal networks, which often don’t include minority executives. “Organizations need to broaden where they are obtaining their talent from. If you keep looking in the same place, you will continue to get the same answers. They need to go beyond their personal networks,” Ashby said.
Diligent, a company that provides board management software, just launched a new database designed to give companies access to the most diverse listing of board-ready executives internationally. It’s also designed to give those board-ready executives a clearer view of the open board seats available.
“We’re trying to create more visibility into the pipeline of talented people. We want to make it as easy as possible for everyone,” said Diligent CEO Brian Stafford.
Diligent invited the 700,000 board members, CEOs, CFOs and chief human resource officers, or CHROs, of the companies that use its software to nominate “two diverse candidates with an emphasis on racial diversity.” Organizations dedicated to the professional advancement of minority executives also will be nominating candidates.
Any company can list an open board role for free. And any candidate nominated for inclusion in Diligent’s database can find out which companies are searching for new directors and express their interest in being considered.
Boards also can leverage those organizations that specialize in identifying and building diverse talent, like the Executive Leadership Council and others, Ashby said.
More transparency around board recruiting and diversity
Companies are not legally required to disclose the racial and ethnic breakdown of their employees, executives or board members. But some companies and localities have taken matters into their own hands.
California, for example, has proposed legislation that would require public companies headquartered in the state to have at least one board member from an underrepresented community by the end of 2021 and at least two or three – depending on a board’s size – by the end of 2022.
Underrepresented communities are defined in the bill as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian and Alaska Native.
If passed, the new law could establish a new minimum threshold for corporate diversity, much like the state’s law requiring a minimum number of women directors, enacted in 2018, said David Bell, co-chair of the corporate governance practice at the law firm Fenwick & West.
“The standard in California has become investors’ de-facto expectation,” Bell said.
As more investors, customers and employees assess businesses partly on how diverse they are, it’s an issue companies can’t ignore.
Recently, ISS, which provides research and proxy voting recommendations for institutional investors, asked public companies to disclose the “self-identified” race or ethnicity of the company’s directors and named executive officers.
The goal, ISS noted: To give their clients a more complete picture of the business “as they consider the wider debate concerning the state of corporate diversity beyond gender.”
The diversification of boards won’t happen overnight. Director turnover is usually low, and board searches take a long time. But Bell, Gordon and Ashby are cautiously optimistic that the push today to increase the racial and ethnic diversity of directors is likely to result in more progress over the next few years than has occurred in the past 20.
“There seems to be a sea change going on in our country and this is certainly an inflection point. I also believe we don’t have a choice this time,” Ashby said.
Correction: An earlier version of this story misstated the first name of theBoardlist CEO Shannon Gordon.